2 Unpleasant Surprises Awaiting Retirees When It Comes to the 2027 COLA

In 2027, retirees could get a large Social Security cost-of-living adjustment (COLA). In fact, estimates from various third-party analysts who track the program put next year's Social Security benefits increase at 3.8% to 4.7%.

While this would be considerably larger than the 2.8% raise seniors got this year or the 2.5% raise in 2025, retirees face two big issues related to the upcoming 2027 COLA that are likely to lead to disappointment. Here's what they are.

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1. The COLA won't do much to increase buying power

The first big issue that will make the COLA disappointing to retirees is that it's very unlikely to actually increase their buying power. And that's true whether it's 3.8%, 4.7%, or any other amount.

The reason for that is simple. The Social Security COLA is not actually meant to increase buying power. It is intended to help retirees avoid losing ground due to inflation. That's why the annual benefits increase is actually calculated using a measure of inflation -- the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. So, if benefits increase by 4.7%, that's because prices also likely went up by around that much.

And sadly, prices may actually have gone up by more than that amount. While CPI-W is used to calculate the annual increase, retirees are not urban wage earners or clerical workers, and they don't have the same spending habits.

The inflation retirees experience typically outpaces the inflation measure used to calculate annual raises, which is why the Senior Citizens League estimates that Social Security benefits have lost 20% of their buying power since 2010.

So while retirees may see their checks grow much larger, odds are their purchasing power will decline. And that's going to be a big disappointment for seniors who have been hearing about a big raise.

2. Medicare premiums could take up a big chunk of the benefit increase

The second big issue that will cause disappointment is that retirees are very unlikely to see the full amount of the increase.

A senior receiving $2,000, for example, could theoretically receive around $94 extra per month. But there's a big catch: Medicare premium increases.

For most retirees age 65 and up, Medicare premiums are deducted from monthly checks. And when Medicare premiums increase, this eats into the COLA. In 2026, for example, premiums rose to $202.90 from $185 in 2025, costing most seniors an extra $17.90 per month.

If a similar increase happens next year, that would come right off the COLA, so that the retiree on track for $94 extra would end up with just $76.10. A larger premium increase is also possible, although hold-harmless provisions at least protect against benefits going down.

Still, retirees will likely have plenty of reasons to be disappointed with the COLA next year. They should make sure they are prepared for the fact that, even if they get a big raise on paper, they will probably still need to rely heavily on their retirement plans to make up for any further reduction in Social Security's buying power.

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